ASX CLOSE: Market finishes higher; financials perform well

Friday 25th September 2009

In Asia, regional markets were predominantly weaker today as bearish leads from the US and a record $5.6 billion share offering from Nomura Holdings weighed on equity markets. The Nikkei 225 was the biggest faller, closing down 2.7% while the Kospi finished 0.1% lower. Elsewhere, the Shanghai Composite and Hang Seng are still trading, currently up 0.3% and down 0.6%, respectively.

In Australia, the ASX 200 staged a remarkable recovery, rallying more than 1.5% from the lows to finish 0.3% higher at 4713.3. The market had been down as low as 4639.4 thanks to the bearish leads in the US and weaker commodity prices.

However, ANZ's announcement this morning coupled with the RBA's strong assessment of Australia's banks yesterday triggered an avalanche of buying among the big four banks. Also, a communiqué released from the G20 this afternoon said that G20 had agreed to avoid withdrawing economic stimulus prematurely and to work together on exiting the stimulus measures when the time is right. It obviously added a lot of confidence to market globally, with the S&P 500 futures rallying.

If yesterday's close above 4700 was bullish then todays would be even more so.

ANZ's announcement has given investors confidence that its cash is being put to good use through earnings accretive acquisitions at attractive prices.

For those yet to get long this market, the frustration continues as any inkling of weakness gets snapped up by stock hungry institutions. There's simply too much demand. Gone are the days of waiting for 5% - 10% pullbacks, that's what dreams are made of. The big money is settling for 2% pullbacks.

For the ASX 200 to rally more than 1.5% on a Friday afternoon when all Asian markets are down more than 0.5% is truly impressive, especially given the gains we've already seen in recent months. Friday's are usually the domain of the ‘profit taker'.

Looking across the market, the financials (1.2%), consumer discretionary (0.8%) and energy (0.1%) sectors added the bulk of the points.

In the financials space, it was the big four banks that rallied the market. They were all up between 1.3% and 2.6%, with Commonwealth Bank of Australia the top performer. Suncorp-Metway was the biggest gainer in the sector, rising 2.7%.

ANZ was in the news, announcing this morning that it had bought out ING's half of the joint venture in Australian and New Zealand life insurance and wealth management for about $1.76 billion, funded by internal capital. ANZ believes it brings certainty to the joint venture, will be EPS accretive in FY10 and expects significant revenue and cost synergies. It also believes the purchase price was attractive. The deal is expected to be finalised in Q4 this year.

In the consumer discretionary sector, Harvey Norman (3.8%), David Jones (3.1%), JB HiFi (3.1%) and Ten Network (1.8%) were the biggest gainers. Ten Network was boosted by a raft of target price increases from the likes of Citigroup, Royal Bank of Scotland, Credit Suisse and JPMorgan following the sale of CanWest's 50.1% stake, which they say has improved the groups outlook and removed a significant overhang. Credit Suisse said "Ten is one of the most highly leveraged exposures to the advertising cycle, and with the economic risks moving to the upside it would be a beneficiary of a stronger than expected advertising recovery."

Elsewhere, Royal bank of Scotland, Merrill Lynch and UBS have all upped David Jones's earnings on expectations of profit upgrades post Christmas. However, none of them see value in the stock at current levels.

In the energy space, Origin Energy and Woodside Petroleum recovered some yesterday's falls, rallying 1.6% and 1.3% respectively.

On the downside, the falls were concentrated in the materials space with the likes of Lihir Gold, Fortescue Metals Group, Amcor, Rio Tinto and Orica all down between 1% and 2%. BHP Billiton lost 0.5%.

Prices are in AUD unless otherwise stated.
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